U.N. Gives CO2 Auditors Time To Study Liability Plan

Date:17-Sep-10Country: UKAuthor: Nina Chestney

A United Nations panel will give clean energy project auditors three weeks to study a proposal to make them liable for over-issuing Kyoto carbon offsets, according to a webcast of a panel meeting on Thursday.

An executive board meeting of the U.N.'s Clean Development Mechanism (CDM) draws to a close this Friday in Brazil, after which auditors have three weeks to consult on a proposal to force them to buy back excess carbon offsets, in cases where the board finds the developers claimed too many.

The board was given the power to implement such procedures at a U.N. meeting in Canada in 2005.

The meeting is also notable as the first time the 10-member U.N. panel rules on whether a coal plant should be allowed to earn carbon offsets under the CDM.

Coal is the most carbon-emitting form of power generation, but the project developers of the plant in question, Adani Group of India, says its 1.33 gigwatts coal plant is more efficient than most.

At the beginning of this month, the board made a controversial proposal to make project auditors liable for over-issuing offsets called certified emissions reductions (CERs) from projects which destroy the greenhouse gas HFC-23.

The board delayed issuing CERs after claims some refrigerant gas manufacturers, who earn CERs by destroying HFC-23, have artificially ramped up production.

The proposal would force auditors, called designated operational entities (DOEs), to buy back wrongly issued CERs at current market rates.

"I don't want to be responsible for the CDM collapsing because we have issued a rule which makes DOEs leave the market. We try to increase the number of DOEs, not decrease them," board member Lex de Jonge said at Wednesday night's meeting.

The board also said secondary CER buyers would not be held liable if credits they bought were mistakenly issued.

AUDITORS

The $2.7 billion CDM lets companies invest in emissions cuts in emerging nations and in return get offsets once the projects are verified by DOEs.

Norway-based certification company DNV, one of the largest DOEs, said it was very happy to hear a consultation period had been granted.

"We asked the EB to seek consultation before this (proposal) was introduced as we need time to look into the legal aspects," Stein Jensen, head of DNV's climate change unit, told Reuters.

"The (provision for) the replacement of CERs has always been there but the EB has introduced words which called for strict liability -- words which had not been there before," he said.

"So far there is no intention to withdraw from the CDM but we need to understand whether there is a change to the risk of liability compared to before."

Michael Fahy, vice president of environmental services at auditor SGS, said it was too early to say what the company's strategy would be if the proposal was eventually implemented.

"It implies strict liability and we would have to look at whether there is a way we can pass that liability onto the real holder of it -- for example if the project proponents gave us some false information, whether knowingly or unknowingly."

Even when the proposal is voted on by the board at its next meeting in October, it still has to be signed off at an annual U.N. climate summit in Mexico this November.

"We very rarely see something as a draft proposal which gets enacted quickly," Fahy said.